EBay moves into brick-and-mortar world

SPOTLIGHT ON RETAIL

Online marketplace operator eBay tried a new strategy this holiday season, teaming up with Macy's and Toys R Us to go after revenue from shoppers who are out and about, not just online.

Mobile technology created by eBay for retailers helps consumers find and navigate stores and use discounts. The Macy's application, for example, senses when shoppers enter a store, sends a mobile coupon and gives directions to the right department to make a purchase.

"This is part of our playing in the commerce ocean, not just the e-commerce pond," said Steve Yankovich, eBay's vice president of mobile.

Store shoppers

By allying with real-world retailers, eBay stands to gain a larger share of the 95 percent of shopping that, according to the U.S. Department of Commerce, still takes place in stores. The company has been adding tools for retailers as it pursues new ways to boost revenue, which is estimated to rise to $14.1 billion this year. While that's up 62 percent since 2009, it's still just a fraction of Amazon.com's projected $62 billion for 2012, according to data compiled by Bloomberg.

Macy's, Toys R Us and eBay's other partners, including Best Buy and Target, benefit from a company whose expertise lies in both building technology and getting people to shop online.

Yankovich declined to comment on how much revenue the partnerships are expected to generate for the San Jose company, though he said "you'll see a lot more" of them in coming months.

"I'm not sure from an immediate monetization standpoint that it's a huge opportunity, but from a brand-building and mobile-penetration standpoint, it's probably a significant opportunity," said Daniel Kurnos, an analyst at Benchmark Co. in Delray Beach, Fla. "EBay is becoming more and more of a technology play."

Retailers across the board are trying to target shoppers wherever they are, taking heed of trends that show more people are making purchases on mobile devices. Customers who opt to go into stores want technology-driven perks in exchange for forgoing the convenience of shopping from a couch, Yankovich said. Retailers will pay for tools that can help consumers navigate crowds and find shortcuts to sales, he said.

Smartphones, tablets

More than 18 percent of shoppers used a smartphone or tablet to access a retailer's website on Cyber Monday this year, an increase of 70 percent over 2011, according to a report from IBM Corp. Mobile sales almost doubled, making up 13 percent of total Web-based purchases, IBM said.

EBay projects sales over mobile to reach $10 billion this year. About $57 billion in sales transactions took place online in the third quarter, while total retail sales reached $1.1 trillion, according to the U.S. Department of Commerce.

EBay Chief Executive Officer John Donahoe is using GSI Commerce Inc., which he acquired for $1.9 billion last year, to target potential partners in mobile technology. GSI already provides many of these customers with point-of-sale systems, marketing and merchandising.

New idea from eBay

"I can't say that we had eBay on our list of development partners until they came to us with this opportunity," Jennifer Kasper, vice president for digital media and multicultural marketing at Macy's, said. "As a consumer and as a marketer, that's not where I had situated them in my mind."

The new in-store features became available in an update to the existing Macy's app 10 days before Black Friday. It garnered 200,000 new downloads in that period and prompted a third of the installed base to upgrade to the newest version.

The transition into building software tools for physical retail partners has been under way since the company bought GSI last year. Yankovich, Donahoe and other eBay executives have been mentioning the prospect in meetings with CEOs and other top executives who run the physical stores for big brands.

While eBay is working mainly with GSI partners at first, the company eventually plans to move outside that group.

Competition

Still, the opportunity for eBay may be limited as some retailers hire developers of their own to craft mobile e- commerce tools without outside help. Sears Holdings Corp., for example, has hired former Amazon, eBay and PayPal employees to help it come up with useful ways to incorporate tablets and smartphones into stores.

Sears also has given consumers options beyond fast delivery. An online purchase can be picked up at a store, with a guarantee that the product will be ready within five minutes of a customer's arrival. On the weekend of Black Friday, more than half of Sears shoppers chose that option.

EBay unveiled a similar option in November called eBay Now. The mobile app helps retailers deliver items from their stores to local online shoppers in under an hour. Macy's, Toys R Us, Target and Best Buy all use the program.